Insurers Using Familiar Playbook to Protect Profits in California

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For the next two months, Californians will to be subjected to a barrage of TV, radio and online ads, which, ironically, they unknowingly will be paying for with their health insurance premiums.

The ads are a part of a multipronged, multimillion-dollar campaign — developed by public relations, advertising firms and political consultants for the state's biggest insurers — to convince voters that an initiative on the Nov. 4 ballot designed to protect them against unreasonable rate increases will actually cause their premiums to go up.

As of last week, a small handful of health insurers had contributed tens of millions of dollars to an organization called Californians Against Higher Health Care Costs. If you think the companies' CEOs opened their personal checkbooks to finance that group's work, think again. It is their customers that are paying for the propaganda campaign.

Californians Against Higher Health Care Costs (CAHHCC) is not a grassroots, consumer-led organization as the name implies. If you check out its website, you'll read that it's a "coalition of doctors, nurses, hospitals, health plans, and California employers" who want the state's residents to vote against Proposition 45, which would give the state's insurance regulators the ability to reject health insurance rate increases they deem excessive.

But while a number of business and health care provider groups presumably have joined the coalition, it doesn't appear that any of them have put any money on the table. According to state filings, the campaign is being financed almost exclusively by five insurers with the most customers in the state: Anthem/WellPoint, Blue Shield of California, Kaiser Foundation Health Plan, Health Net, and UnitedHealthcare.

Of $37.9 million donated to CAHHCC as of August 22, $37.3 million came from those insurers and their PR and lobbying group, the California Association of Health Plans. The rest came from a small group of insurance brokers and their PR and lobbying groups, the California Association of Health Underwriters and the National Association of Health Underwriters.

The main argument cited by these groups' opposition to Proposition 45 is that it might interfere with the efforts of Covered California, the state's health insurance exchange, to provide individuals and small businesses with affordable coverage options in a timely fashion.

California Insurance Commissioner Dave Jones, who is up for re-election this year, rejects that argument. In a letter to state lawmakers this summer, Jones wrote that if voters pass Proposition 45, his department — which has long had the ability to reject proposed rate increases from auto and property and casualty insurers — will work cooperatively with other state agencies "to ensure that rates are reviewed and approved to meet Covered California… deadlines."

Jones also pointed out that insurance regulators in 35 other states already have the ability to disapprove unreasonable rate increases, and he offered a point-by-point rebuttal of a report commissioned by the insurance industry that suggested Proposition 45 could undermine provisions of the Affordable Care Act.

Jones wrote that his department has had more than three years' experience reviewing individual and small group health insurance rates under the federal reform law "including experience last year completing review of health insurance rates in time to meet Covered California's deadlines to allow health insurers to offer health insurance in the California exchange."

As a former health insurance company executive, I'd be willing to bet that the state's health insurers care far less about meeting Covered California's deadlines than meeting their profit goals. Their real concern, in my opinion, is that regulators with more experience reviewing insurers' business practices than Covered California staffers might be more likely to detect proposed rate increases designed more to pad their bottom lines than to cover expected increases in medical costs.

According to the Los Angeles Times, a recent poll showed that 69 percent of registered California voters support Proposition 45, which means that the health insurers have their work cut out for them. But $38 million deployed strategically can change a lot of minds. And insurers know from successful campaigns they've conducted in the past that carefully targeted negative ads — and the use of front groups and surrogates — can quickly turn public opinion..

Having been a part of planning and implementing such campaigns in my previous career, I can tell that the industry is conducting a "bifurcated" campaign in California. The industry's message for conservatives, communicated by its allies in publications like, is that if a Proposition 45 passes, Democrat Jones would become a health care "czar" empowered to destroy the "free market."

Another message for conservatives is that it would enable "trial lawyers who fund Jones's campaigns" to get rich by intervening on behalf of health plan members and policyholders in the rate-approval process by filing "frivolous lawsuits" against health insurers.

The industry's key message to scare liberals, communicated by its "coalition," is showing up in media seldom seen by most conservatives. Some of that $38 million was spent last week on an ad in featuring a large picture of President Barack Obama and this message: "Protect Obamacare from Legal Attacks. Prop 45's Dirty Little Secret: More Attacks Against Obamacare. Vote No on 45!"

I will continue to monitor the industry's campaign and write more about it in the weeks ahead.

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